For many couples in their 40s, 50s, and 60s, retirement accounts represent far more than savings. They reflect years—often decades—of consistent work, careful decisions, and long-term planning.

As these accounts grow, they frequently become one of the largest components of an estate. Yet they do not transfer to the next generation in the same way as other assets. And under current law, the outcome for your children can look very different than many families expect.

Why Retirement Accounts Require Special Attention

Retirement accounts operate under a unique set of rules that combine tax law, beneficiary designations, and estate planning strategy.

Unlike real estate or investment accounts that may receive a step-up in basis, traditional IRAs and 401(k)s are generally subject to income tax when distributions are taken.

This becomes especially important when those accounts pass to your children.

Under current law, most non-spouse beneficiaries must withdraw the entire account within 10 years of inheritance.

For adult children who are already in their peak earning years, those required withdrawals can significantly increase taxable income—sometimes pushing them into higher tax brackets.

What was intended as a meaningful legacy can be reduced more than anticipated.

What Changed Under the SECURE Act

Prior to recent changes in the law, many beneficiaries could “stretch” distributions over their lifetime, allowing the account to continue growing tax-deferred.

Today, that option is largely gone for most families.

Instead, the 10-year rule applies to most non-spouse beneficiaries, requiring full distribution within that timeframe.

There are a few exceptions, including:

• A surviving spouse
• Minor children (for a limited period)
• Beneficiaries close in age
• Individuals with disabilities or chronic illness

For married or partnered couples, this creates an important planning question:

How do you preserve flexibility for a surviving spouse while also protecting what ultimately passes to your children?

Where Many Plans Fall Out of Alignment

One of the most common issues we see is a disconnect between documents and designations.

Beneficiary forms are often completed years earlier—sometimes decades—and rarely revisited. At the same time, trusts may be drafted without fully accounting for retirement account rules.

Because beneficiary designations control these assets, even a carefully prepared trust can be unintentionally bypassed.

The result is often:

• Missed opportunities for tax efficiency
• Unintended distribution outcomes
• Increased exposure for beneficiaries

This is not usually a failure of intent—it is a lack of coordination.

How Thoughtful Planning Can Improve the Outcome

When properly structured, a trust can play a meaningful role in managing how retirement assets are received and used.

Depending on your goals, a trust can:

• Provide protection from creditors or divorce
• Support beneficiaries who may benefit from structured distributions
• Create oversight for significant inheritances
• Align with broader multi-generational planning goals

At the same time, tax considerations must be carefully balanced.

Some strategies allow distributions to pass through to beneficiaries to help manage tax impact. Others prioritize long-term protection and control, even if that means accepting higher tax rates at the trust level.

The right approach depends on your family, your assets, and your priorities.

A More Coordinated Approach for Florida Families

For couples with established assets, blended families, or business interests, estate planning is rarely one-dimensional.

A thoughtful plan considers how each piece works together:

• Retirement accounts and beneficiary designations
• Trust structure and distribution design
• Planning for both a surviving spouse and the next generation
• Flexibility to adapt to future tax law changes

When these elements are aligned, your plan is more likely to function as intended—not just on paper, but in real life.

Because ultimately, the goal is not simply to pass assets forward.

It is to do so in a way that preserves value, reduces unnecessary burden, and supports the people you care about most.

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This article is a service of Sibley Law & Associates, PLLC. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. 

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own, separate from this educational material.